Since 2011, property owners have largely enjoyed a ratio of high rents...Read more
Simple answer – yes.
The long answer means unravelling the dark underbelly of owning a rental property – what’s lurking in the shadows and waiting to strike. Is that a bit melodramatic? Perhaps. But it won’t seem so dramatic when your sewer backs up and you’re literally knee-deep in s***.
Sorry... maybe we are going too deep here. Suffice it to say that we just want you to play it safe.
It’s a form of insurance that offers coverage from damage sustained to a landlord’s rental property or the landlord’s belongings – usually appliances and sometimes furniture. It’s different from homeowners insurance since that coverage typically does not cover a tenant’s dwelling. There are exceptions, and if your homeowners insurance does have solid coverage for your tenant, then you’re in the clear!
But odds are it does not. And you wouldn’t skip out on homeowners insurance… right?
You’re a landlord. That means all of, or part of, your property is actually the responsibility of a tenant (at least as far as homeowners insurance is concerned).
Let’s say your tenant throws a sweet party for their friends. Drinks are pouring, ping pong balls flying, and laughs are abound. That is, they were.
Why did the excitement die off, you ask? Well, someone cracked a water main and your property value began plummeting by the second. Everyone flees while your tenant grabs their phone to call you.
In a panicked voice they ask, “WHAT DO I DO!”
And all you can do is hope that they have
If you are already getting nauseous, you should probably just skip over this section.
Okay, so your place flooded. Let’s pretend it wasn’t your tenant’s fault. Well, they need somewhere to stay, and that’s going to come out of your wallet. What’s more, you won’t be getting any rent while the repairs are being completed. The losses are twofold.
If flood coverage is not already on your insurance, then it’s about time you start checking rates.
You’ve got some choices to make when it comes to landlord insurance. Companies are going to throw a few dozen optional coverages at you. Once you are certain that you have an adequate amount of liability coverage, you can take a look at those.
"Deciding on insurance is the most fun I've had in years" – No one, ever
The big one here is liability coverage. Just like with car insurance, you do not want to be paying for medical expenses. Liability coverage ensures that if someone gets hurt on your rental property, they will be compensated without you going bankrupt in the process. Since you have little to no control over how many guests your tenant has over at once, think twice about skimping here. You might want to help them shovel the walkway once in a while too.
There are the usual coverage options that insurance companies offer on homeowners insurance, too. You know, earthquake insurance, hail insurance, these types of things. If you think it’s a risk, there's no harm in adding it.
Remember that introductory paragraph about the sewage? That’s where "Sewer Backup” coverage comes in handy. Unfortunately, your insurance plan probably does not protect you from that sewage pipe – you know, the one running from your home to the street – bursting. Yeah. It can get gross (and costly) very fast.
One last interesting addition is
So if your five-year-old fridge is garbage because of a flood, the insurance company is only going to pay you whatever a five-year-old fridge is worth – the value depreciates over time. Replacement Cost coverage will pay you out whatever it costs to get a new fridge with equivalent features.
At the end of the day, everything we do here at Naborly is to help protect landlords and help good tenants find great landlords. One way to help yourself is to get insured.
We are not an insurance company, so we won’t start listing rates and making recommendations on what’s right for you. There’s plenty of brokers and agencies out there vying to offer you coverage, so do a little research and read before signing. You’ve got this.
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